Summary

Natural Gas:

The NYMEX prompt-month contract decreased $0.02 per million British thermal units (MMBtu) to $3.67/MMBtu last week. The 12-month NYMEX strip price was down $0.19/MMBtu to $5.31/MMBtu. Last week, the Henry Hub cash price increased $0.23/MMBtu to $3.57/MMBtu. 

The NYMEX prompt-month contract closed above $4/MMBtu for a couple of days last week on bullish manufacturing data. However, the price fell sharply after a bearish storage report.

Storage:

The Energy Information Administration (EIA) storage inventory for the week ending July 31 rose by 66 billion cubic feet (Bcf) to 3.089 trillion cubic feet (Tcf). The build was larger than expected. The storage level is 430 Bcf above the five-year average and 580 Bcf more than the same period in 2008. 

Some storage operators are reporting that their facilities are nearing 90-percent full. As storage levels approach capacity, injection rates will decline.

Weather: 

This week, most of the U.S. east of the Rockies should be warmer than normal. The temperature trend that has been is place for several weeks is expected to change. The Northeast should be warmer than normal and the South should be normal to cooler than normal during the six- to 10-day and eight- to 14-day time frames. 

Imports:

Send-out volumes last week from liquefied natural gas (LNG) terminals totaled about 1.1 billion cubic feet per day (Bcfd), which was 0.1 Bcfd higher than a year ago. Canadian imports were 7.9 Bcfd, which was 0.3 Bcfd less than last year. 

Exploration and production: 

The total U.S. oil and gas rig count increased by 18 last week to 966 rigs. The oil rig count rose by 14. The total rig count has increased by 90 rigs since the low of 876 on June 12. The Canadian rig count decreased by five to 195 rigs.

Electricity:

Electricity generation for the week ending Aug. 1 was 5.1 percent higher than the prior week and 8.3 percent lower than a year ago. Year-to-date electricity usage is 4.6 percent lower than last year.

Petroleum:

The NYMEX West Texas Intermediate (WTI) prompt-month contract settled at $70.93 per barrel (Bbl) on Friday, up $1.48/Bbl. The contract traded as high as $72.84/Bbl last week. The spread between the prompt-month contract and the 12th-month contract widened during the week from $8.17/Bbl to $8.30/Bbl on Friday. Brent crude settled at $73.59/Bbl on Friday. U.S. retail gasoline prices rose 9 cents last week to $2.61 per gallon. 

For the week ending July 31, crude oil inventories increased by 1.7 million barrels (MMBbls), distillate inventories decreased by 1.1 MMBbls, and gasoline inventories decreased by 0.2 MMBbls. The crude oil inventory increase was greater than expected while the drawdown in gasoline inventories was smaller than expected. Storage levels at Cushing were higher by 1.2 MMBbls at 33.3 MMBbls last week. Storage at Cushing has been growing steadily and is approaching the record high of 34.9 MMBbls. U.S. refinery utilization fell 0.1 percent to 84.5 percent.

Compared to last year, the EIA estimates that the four-week rolling average U.S. gasoline demand was up 0.5 percent, distillate fuel demand was down 7.9 percent and jet fuel demand was down 11.9 percent. Total products supplied to the U.S. market were down by 3.1 percent. 

The International Energy Agency (IEA) announced that production from existing oilfields is declining at nearly twice the rate estimated in 2007. Production from the 800 largest oil fields is declining at a 6.7 percent annual rate.

A Bloomberg survey indicated that OPEC production in July was 45,000 barrels per day (Bpd) higher than in June. If the cease fire in Nigeria holds, traders think that Nigeria’s production in September could reach 2.1 million barrels per day (MMBpd) compared to its quota of 1.67 MMBpd.

Economy: 

Nonfarm payrolls in July decline much less than expected to 247,000. The unemployment rate unexpectedly fell 0.1 percent to 9.4 percent. The trend of the payroll and the unemployment rates differ because they are based on different methodologies. The four-week rolling average of new unemployment claims fell to the lowest level since January 24.

The Institute for Supply Management (ISM) manufacturing index rose to the highest level since last August. The index shows a slight contraction in the sector. The service sector index was lower in July than in June.

Consumer spending in June was 0.4 higher than May, but personal income fell 1.3 percent. The savings rate fell from 6.2 percent in May to 4.6 percent in June. The average work week continued to set a new record low. Year-over-year, same-store retail sales fell for the 11th straight month. Pending home sales rose for the fifth straight month.

In July, Ford had a year-over-year sales increase while all other manufacturers had a decrease. The Senate approved another $2 billion for the “cash for clunkers” program which is expected to generate an additional 400,000 new vehicle sales. Some car manufacturers are reporting low inventories for certain auto models. 

The Associated Press estimates that federal tax receipts will drop 18 percent in 2009, the largest decrease since 1932. The federal budget deficit is expected to grow to $1.8 trillion.